Stock Market Analysis

Secondary Mkt 1225 views 2 replies

VINOD

BUSINESS

50 Points Joined April 2008

Dear Fellow members / Guests,

It’s been a great journey quite some time for all of us and it’s a informative portal wherein we can exchange our views and experiences with each other as well with the World at large.

I have a similar query for you all:

HOW EFFECTIVE DO YOU FEEL IS THE STOCK MARKET ANALYSIS WORKS ESPECIALLY THE TECHNICAL ANALYSIS IN TODAY'S MARKET CONDITIONS? ARE YOU OF THE OPINION THAT THEY HOLD GOOD OR GOOD BUT NOT OFTEN OR SIMPLY USELESS?

I am very much confused about the market analysis the technical analysts do, esp. on the business channels on television, as they tend to give the support - resistance levels at such prices of any particular scrip which many a times seems simply absurd and an investor - day trader / position trader ends up being confused on following there levels.

I am sure many of you agree that most of the retail investors simply invest money in the stock market and stocks that they feel like investing without going deep in the company details.

Do throw some beam of light in this area of study - technical one, which might be used by both day traders and position traders.

Thanks and regards

Manish Jain

Replies (2)

Piyush Jain

283 Points Joined July 2008

Manish, first thing that should be considered here is that no analyst is a jyotish. They give their advice based on what they feel from their knowledge and experience.

Their is no hard and fast rule to make merry of stock market all the time. Although the basics of investment has not changed. The golden rule still prevails i.e. a) Buy if you can hold (even for day traders), b) Be dynamic and always be on your feet when the market is open, c) before investment fix a profit/loss booking level for your stock (i.e. 40% high i will exit, 10% low i will exit).

Piyush

CABD

Investment Banking

29 Points Joined December 2008

probably you might not have asked this question if were aware from where the technical analysis orginated.

Both a stock trader or long term investor wants to earn profits by change in prices. The the criterio which distingues them is - stock trader try to gains due to change in prices due to demand supply changes for the stock while long term investor is a value investor who cares about the earnings attached to the stock i.e. EPS. A long term investor buys the stock for which he believes EPS is going to increase while a trader buys the stock if he feels the demand for the stock in question is going to increase.

Now coming back to technical analysis, it a simple discipiline which helps you predicts the changes in demand and supply changes for a stock in short term based on past behavious plus certain principles. Remember the technical analysis is not very much concerned about the fundamentals of the company, though macro factors sometimes affect the decisions.

If you see the logic of technical analysis, its pretty obvious. for example say suppose in history it has been observed that whenever nifty touches 2500 level poeple feels the prices are attractive and start buying the shares and hence demand increases. This forms the support of 2500 level. Likewise every principle in technical analysis is based on pure logic. Hence whether technical analysis works or not, I would say it has the same uncertainty attached as any other business in this world, provided you do it properly. But due to its simpliicty people start doing thier own technical analysis wihout understanding its underlying logic.

Hope I have thrown some light on it.Things get easier to understand it you look at the big picture and try to understand the logic behind it.